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Another Unworkable Presidential Energy Policy

We can't quickly color our imported crude replacement policy green.

I'm not indulging in political sideswiping when I note that the prospects of achieving President Obama's objective of cutting oil imports into the U.S. by a third within the next decade are eminently doable. But I'd also argue that our chances of actually hitting that target fall somewhere between slim and none.

I recognize that Republicans are placing the blame for increasing gasoline prices on the administration's pokey approach to issuing deepwater Gulf of Mexico drilling permits following the year-ago BP(NYSE: BP) Gulf of Mexico spill. That snail's pace approach, along with the refusal to open other promising hydrocarbon venues, have the GOP in a lather.

Just the latest in a long lineBut Obama was spot-on when he noted this week that he's not the first president to discuss steering the U.S. toward energy independence. Indeed, while I must admit to being a distant cousin of the father and son Bushes -- I'm not in line for a Kennebunkport weekend invitation -- I can't give either a higher grade than Obama for establishing a meaningful and lasting energy policy.

That's especially amazing when you consider that both father and son began their careers in the energy business. Nevertheless, the executive ban on offshore drilling was signed by the first President Bush in 1990, but not removed by the second Bush until the latter days of his second term.

Still, Obama's approach offers far more rhetoric than new initiatives to deal with our being held over an energy barrel. He's called for the establishment of new incentives to increase oil, gas, and biofuels production, along with strengthened efficiency standards for cars and trucks. And he's renewed his call for increased dependence on cleaner energy sources, including nuclear, wind, solar, biofuels, and natural gas. Of course, we've heard those measures advocated before.

The lucky sevenRegarding drilling offshore, this week the president also defended his administration's approach, pointing to the 39 shallow-water permits that have been issued following the implementation of new safety measures in 2010. That compares to seven deepwater permits that have recently been handed out to a diverse group of companies, including Houston-based ATP Oil & Gas(Nasdaq: ATPG) and Chevron(NYSE: CVX).

Also as to deepwater drilling, he said, "If you're going to drill in deep water, you've got to prove that you can actually contain an underwater spill. That's just common sense." My response to that careful recitation of the obvious is to note the uniqueness of the BP spill. It's not as if comparable accidents occur each time the swallows touch down in Capistrano.

Further, I'd point to Marine Well Containment Co., a Big Oil group headed by ExxonMobil(NYSE: XOM) and formed following the spill. Its task, which it has largely completed, was to create systems and equipment to deal effectively with other Gulf spills. At the same time, another group headed by Houston's Helix Energy Solutions(NYSE: HLX) has developed a competing system. So the available safety measures have been ramped up substantially since last spring.

The fed's fantasiesThe Interior Department produced a report this week in which it maintains that in excess of two-thirds of the leases held by companies are not producing or even being explored, despite the likelihood that they contain -- using the department's figures -- at least 11 billion barrels of oil and perhaps 50 trillion cubic feet of natural gas. Obama is proposing incentives to leaseholders for more rapid exploration and development of the properties.

You can bet your bottom dollar that those "incentives" won't take the form of candy or tickets to Disney World. Rather, they'll likely consist of lease forfeitures in the event of drilling delays once a specific time interval has passed. But let's hope that, before they begin putting stopwatches on drilling programs, the feds learn that lots of leases turn out not to be worth even wetting the tip of a drill bit once seismic and other studies have been completed.

Gas: the growing solutionEven confirmed hermits know that the biggest -- and likely the most promising -- change in our energy picture during the past half-decade has been the lightning-fast ascendancy of gas and oil extracted from shale. Indeed, in December the Energy Department doubled its estimate of U.S. shale gas reserves to 827 trillion cubic feet. Expectations are that natural gas from shale will represent as much as 45% of our natural gas supply by 2035, up from about 15% today.

From my perspective, the only significant impediment to that expected growth could be the ability of environmentalists to succeed in their claims that the chemicals used in extracting hydrocarbons from shale really are harmful to water tables. While the Environmental Protection Agency has fracking in its crosshairs, Halliburton(NYSE: HAL) and other makers of fracking chemicals are at work on new, safe formulations.

Waiting for GodotAs to the increased dependence on nuclear, for which the president is striving, the horrors in Japan of the past month are, to my mind, surprisingly inconsequential. That wouldn't be the case, however, if the time from initial planning to operation of a new nuclear plant weren't in the range of 20 to 30 years. So, while we can and should think in terms of. building additional safe nuclear power plants -- at least for our children's sake -- in the meantime, we have little choice but to expand the use of other viable substitutes for oil (think gas).

And with global economics and geopolitics changing almost daily, the same argument applies to renewables, e.g., wind, solar, biofuels, etc., of which the president remains enamored. On Thursday, The Wall Street Journal described the weaknesses plaguing the renewable sector. For instance, it said that renewable energy "remains too expensive to compete head-to-head with fossil fuels." And perhaps even more of an obstacle, according to the Journal, is that, "Much of it remains intermittent -- and technical advances that could make it a reliable, full-time power provider remain elusive."

I'd gladly entertain counterarguments to my progressively stronger belief that, while other substitutes to oil may prove to be effective -- eventually -- only natural gas is ready for prime time at a cost that is more than reasonable. As a Foolish investor, I therefore believe that the likes of Exxon and Chesapeake(NYSE: CHK), the nation's two largest natural gas producers, deserve prime watchlist attention. That's especially true since both companies can also find oil.